It appears that efforts to prevent the failure of Lehman Brothers are failing as well. As I’ve said repeatedly, the Federal Reserve itself is bankrupt and unable to do any more bail-outs. And I’ve also been saying that our foreign creditors will start getting cold feet when they recognize that American investments are worthless. The liquidation of Lehman could trigger a whole daisy-chain of writedowns, leading to more failures. The following excerpt reveals the level of desperation to avoid a global panic:
The focus on Sunday had initially been on whether talks between regulators and Wall Street’s top bankers could lead to the sale of Lehman, which until recently was the fourth-largest U.S. investment bank.
However, those talks faltered when Britain’s Barclays Plc, which had appeared to be front-runner to take over Lehman — excluding its toxic mortgage-related assets — said it had pulled out of the bidding.
That triggered expectations the investment bank is heading into bankruptcy and prompted a rare emergency trading session on Sunday to allow Wall Street dealers in the $455 trillion derivatives market to reduce their exposure to the firm.
It’s easy to predict that matters will only grow worse. Even as this is happening, economists remain incredulous that the toxic effects of America’s trade deficit lie at the root of the problem. So, with each passing day, another $2 billion of American wealth is drained away. There isn’t much left and, when it’s gone, watch out!